Business Analysis of Merck

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Business Analysis of Merck
MGT521
August 25, 2011

Business Analysis of Merck
Merck and Company comes from the parent company MerckKGaA, which is one of the oldest pharmaceutical companies in the world according to Mathai, J. A. (2008). MerckKGA was founded by F. J. Merck in 1668. Emanuel Merck took over the business in 1816. Merck and Company was formed from a subsidiary of MerckKGaA. In 1887, Merck sent two employees, George Merck and Theodore Weicker to New York to establish a sales office for the export business. The subsidiary Merck and Company was formed in 1891, which became an independent American company after World War I. The companies are no longer linked except by name. Merck and Company is used in North America and Merck Sharp and Dohme everywhere else. MerckKGaA is used everywhere except in North America where it uses EMD. Merck and Company grew tremendously between 1920-1950 through mergers and research and development (R&D). The merger with Powers-Weightman-Rosengarten led to the Merck legacy for Pioneering R&D. The discovery of vitamin B12 caused a massive increase in sales and profits. The postwar years were very hard on the company. The company struggled with financial issues and a more competitive market. To combat this situation they merged with Sharp and Dohme, incorporated. The merger allowed Merck to sell drugs under its own name. The 1960s through the mid-1980s saw the company move to a strategy of making improvements on research already performed by competitors. This allowed the company to become profitable and to refocus on its own R&D. The late 80s saw double digit sales and triple digit profits from new innovative drugs. This lasted until the late 1990s when the new drug pipeline dried up. The company sold off several business units and reorganized the company. They refocused on R&D and joint ventures instead of mergers to grow the company. In 2009 Merck merged with Schering-Plough to create a new company. The new company is the second largest pharmaceutical company by market share. Merck’s mission statement is to provide innovative, distinctive products and services that save and improve lives and satisfy customer needs, to be recognized as a terrific place to work, and to provide investors with a superior rate of return (Merck & Co, 2009-2011). Merck’s vision is to make a difference in the lives of people globally through their medicines, vaccines, and consumer health and animal products. They are trying to be the best health care company in the world dedicated to providing leading innovations and solutions for tomorrow. Merck’s organizational values are improving human life, ethics and integrity, innovation, and diversity and teamwork. Merck’s mission, vision and values are part of the Strength, Weakness, Opportunities, and Threats (SWOT) analysis. Merck is an attractive company for investors. The main areas that would interest an investor to invest in Merck from a SWOT analysis are Strengths, Weaknesses, and Opportunities. The area concerning threats pertains to threats that affect every company in the pharmaceutical industry. This would affect an investors’ decision to invest in the pharmaceutical industry not just one particular company. Merck is a major player in the United States and global markets. They are actively developing partnerships with several companies and institutions around the world. Merck is increasing its presence in Asia. This will cause a tremendous increase in revenue. The company’s strategy allows them to focus growth on emerging markets such as biologics and vaccines. This strategy is critical to the mission and growth of the company. According to U.S. Pharma & Healthcare Report, 73-101 Merck & Co had global sales of $27.4 billion in 2008, it ranked 2nd in United States prescription sales in 2009, it has a lengthy exclusivity for many products and the move into biologics should raise margins in the long term. Merck’s...
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